European energy-intensive industries have called for revisions to the Middle East Temporary State Aid Framework (METSAF) and its extension until at least the end of 2027, arguing that the existing framework does not provide sufficient support to address high electricity costs and maintain industrial competitiveness.
European companies face electricity prices up to two to three times higher than those paid by competitors in the US and China, creating a significant competitive disadvantage for sectors supplying strategic value chains, including energy, defense and digital technologies, according to the industries. Access to internationally competitive electricity prices is considered essential for maintaining industrial production, attracting investment and supporting electrification and decarbonization.
Despite the European Commission's announcement of plans to extend METSAF, industry representatives noted that no support scheme has yet been implemented under the framework across Europe because of shortcomings in its design. They consequently presented three recommendations to improve the framework's effectiveness.
METSAF electricity support thresholds sought to increase to 70 percent
The European Commission was urged to align METSAF's electricity consumption eligibility and aid cumulation thresholds with its 70 percent support level. METSAF increased the permitted electricity price relief from 50 percent to 70 percent of the relevant annual average wholesale electricity price in response to the exceptional energy cost burden associated with the Middle East crisis.
However, the existing framework continues to limit eligible electricity consumption and the cumulation of METSAF support with compensation for indirect costs under the EU Emissions Trading System (ETS) to 50 percent. These restrictions prevent companies most exposed to electricity costs and carbon leakage risks from fully benefiting from the higher support level, according to the industries. An increase in both thresholds to 70 percent was therefore proposed without changing the framework's overall structure.
METSAF beneficiaries should not be required to reinvest half of their aid
The European Commission was also urged to remove the requirement for beneficiaries to reinvest at least 50 percent of the aid received in measures aimed at reducing electricity system costs. Although METSAF already exempts additional aid granted under its temporary derogation from further decarbonization investment obligations, the requirement continues to apply to a significant portion of the support. Requiring companies facing exceptionally high electricity costs to reinvest half of their financial relief undermines the framework's objective of protecting competitiveness and preventing carbon leakage, according to industry representatives. They also highlighted that energy-intensive industries already face substantial investment requirements to decarbonize their production processes under the EU ETS.
An extension of METSAF until at least the end of 2027 was also requested, with further extensions until European electricity prices stabilize at internationally competitive levels. Short-term extensions would not provide sufficient predictability for industrial investment decisions, particularly given continued uncertainty over future electricity prices, the industries argued. While acknowledging METSAF as a necessary response to current market conditions, industry representatives emphasized that state aid cannot permanently replace competitive electricity prices. They concluded that Europe's long-term priority should be establishing an energy system capable of providing predictable and internationally competitive electricity costs to support industrial production, investment and decarbonization.
